New Study Shows Obamacare’s Huge Additions to Federal Deficit

A study released today by Charles Blahous, one of two public trustees of Medicare and Social Security, once again shows that Obamacare increases federal deficits and significantly worsens the nation’s fiscal outlook. According to the study’s most optimistic scenario, the health law will increase federal spending by $1.16 trillion and increase the deficit by $346 billion between 2012 and 2021. The worst case—and most realistic—scenario: an increase in spending of $1.24 trillion and $527 billion in new deficits.

Obamacare’s failure to reverse the federal government’s abysmal financial situation is not to be taken lightly. The legislation’s primary goal was to expand health coverage. However, Blahous points out that not only were the law’s fiscal benefits “consistently presented as a primary motivation for enacting legislation,” but it was also widely believed that health care reform was inextricably tied to reversing the fiscal outlook, since a significant portion of the nation’s long-term deficits are caused by federal spending on health care.

Blahous makes clear: “Because of the federal government’s untenable long-term fiscal outlook under current law, and because of the political difficulty (and thus infrequency) of comprehensive health care reform, it is essential that such reform unambiguously and significantly improve the government’s fiscal outlook.”

Legislation can, of course, succeed at deficit reduction but perpetuate fiscal irresponsibility—by increasing spending but raising taxes or cutting in other areas by a comparable amount. This scenario, which maintains the trajectory of unaffordable federal health spending, is exactly what will come to fruition under Obamacare. And it is unacceptable.

One of the most significant, and yet most misunderstood, ways in which Obamacare will add to deficits is by double-counting Medicare savings as paying for new health entitlements and extending the solvency of the program itself. This is impossible. Congress can’t spend the dollars twice, and in fact, by law it must apply them to extend Medicare’s solvency or else allow automatic benefit reductions when the trust fund runs dry.

Confusion comes from the Congressional Budget Office (CBO) analysis showing Obamacare would reduce the deficit—“when a specific scoring convention was applied,” Blahous explains. The problem is that the CBO’s and the Medicare Actuary’s scorekeeping methods imply that current benefit levels for both Medicare and Social Security will be sustained, even when their trust funds are empty. This serves a valid purpose, making clear the level of savings needed to sustain the programs and encouraging lawmakers to pursue adequate solutions. But it also creates the illusion that current benefits in both programs can be perpetuated without those savings, which is false.

In this context, the Medicare savings in the ACA [Obamacare] are not “found money” for the federal government, free to be spent on a new health entitlement without worsening the deficit. This is why, when comparing the ACA not to a common scoring convention but to the actual change in law, a worsening of both federal costs and of federal deficits results.

Without Obamacare, the Medicare Part A Trust Fund would be exhausted by 2016. Any savings in Medicare thereafter would first and foremost maintain seniors’ current benefits. This means that of the $850 billion in Medicare savings expected from Obamacare through 2021, only $290 billion are actually available to offset new spending. And this assumes the cuts go fully into effect; since they’re mainly the result of slashing provider payment rates, this is unlikely.

Taking out double-counted Medicare savings alone puts Obamcare’s impact on federal deficits in the red. But as Blahous writes, “This worsened fiscal situation is exacerbated by the substantial financing risks associated with several of the ACA’s specific provisions.” These include:

The now-assured failure of the CLASS program, which created the illusion of deficit reduction by collecting premiums in its first five years without paying out any benefits;

The likelihood that participation in subsidized coverage available in the new exchanges will be higher than originally estimated, and that future politicians will face pressure to remove the cost constraints built into the expensive program; and

The lack of political will to actually implement the new excise tax on “Cadillac plans,” which would otherwise be a significant source of revenue.

[B]oth increases a federal commitment to health care spending that was already unsustainable under prior law and would exacerbate projected federal deficits relative to prior law. This is an unambiguous conclusion, as it would result regardless of the degree of future success attained in upholding various cost-saving provisions now embedded in the law.

Obamacare’s complete and utter failure to improve the federal fiscal outlook is just one of many, many reasons Congress should repeal it.

Join The Discussion

Why won't everyone see this for what it is? Poorly thought through or sinister to the core! Undo able on every measure! Anything saved or created from Obama's care will take this country over in short time.

But most of all, no benefit more punishment! A friend's father in-law thinks he's in the safe zone because he pays for his socialized government run insurance. He was assured that has nothing to do with it other than going to the free care to 30 million. Otherwise NOTHING as far as service! He'll get less!

I learnt from "Penny Health" that Instead, try saying, "There's medically necessary treatment that I'm seeking." Remember, words have power and insurers are all about finding limitations and exclusions if you say the wrong thing.

That wouldn't be the same Charles Blahous who works for the Koch Industries funded Mercatus Center, would it? The same Charles Blahous who advocates privatizing Social Security? Someone like that can't possibly have any ulterior motive for putting out a skewed (and, as it happens, erroneous) study, would he?

Thanks, but I'll take my numbers from the non-partisan Congressional Budget Office, which released an updated analysis last week showing a net $50 billion INCREASE in savings through 2021 over what was originally projected in 2010.

so really what you're saying is you'll pay government to trust government to handle your finances without a flaw because you can't trust yourself to handle your own? I feel so bad for you, kverdeck. Private industries don't make up your mind, why do you want government to?

The basic question, I guess, is what should government do for us? You and many here at Heritage are clearly quite anti-government, so your answer would seem to be "as little as possible." I suggest you keep that answer in mind the next time you get into your car (with government-mandated quality and safety features) to drive on a street or highway (built and maintained with government dollars and regulated by government traffic laws) to go to the grocery store to purchase food (which you may presume will be of sufficient quality to ingest, thanks to government regulations). None of this would be the case if it were only the captains of industry at the helm in an unrestricted free market.

oh brother! who do you think did the work before government existed, kverdeck? I mean do you really believe government existed before people? The car industry created their own safety standards as the government came in to take liberties away. I know! Had a personal friend of mine worn a seat belt because it was the law, she would've died! CRUSHED!

A liberty taken away by government MANDATE!!! NOW the government has the gall to charge a penalty when someone survives but wasn't buckled in!!!!! Money and what they can mandate to bring it in is all you need to know about America's "change" in government!

Roads were first constructed by regular people and businesses that wanted people to get to their stores. Government authority took it over as the population grew and for their reasons with our money. While government barely does acceptable work (deliberate drawing of traffic lines that drift into oncoming lanes over bridges is pretty chancy) and standing unaccountable ADDS RISK! As far as FOOD AND MEDICINE! Government can neglect their duty as much as they want and standing UNACCOUNTABLE ADDS RISK! People aren't perfect why would you think GOVERNMENT controlled by people is?

I will give you this, what you mentioned is what effects all Americans, what you choose not to realize is the anti-constitutional government beyond your mentioning, destroying the true nature of this country and the lives and liberties of all people. Why do you put so much trust in a government of strangers? I'd rather face a person involved that is held accountable when something is wronged then have to go through hell an high water of government and their game playing make work covering their faults! If government is in charge of only what you mentioned, we wouldn't EVER be in a government caused deficit as increased population would carry your said duties of government through!

The CBO only comes up with numbers from data provided to them. They do no research of their own, so garbage in, garbage out. That's what typically happens with the CBO, bogus numbers. Can you name even one instance when government spending was predicted correctly? Can you think of any instance when it was under budget or at least on target? Doubtful.

I like how politicians sell us a bill of goods contingent on promised spending cuts or revenues that never materialize. Whether it's cuts in Medicare reimbursement rates, which have been deferred every year, transfers from Medicare to Obamacare, which happen…but don't happen, revenues from fines on the uninsured or the CLASS program, repeal of the 1099 portion of the bill, etc., Obamacare slipped through by the skin of its teeth because we were told it would reduce the deficit, but the cuts and revenues will fall far short of projections. Therefore, the deficit will rise far higher than projected. It would be better if they had not even meddled in these issues as the Constitution dictates.

Why should anyone be surprised at this new study? Most of us knew when Obama started bribing, lying, and intimidating certain members of Congress this entire issue was a total distortion. When Pelosi and other Democrats went before cameras to support ObamaCare, we all knew they were lying under threat that if they did not support ObamaCare, they would suffer political crucifixion, or they are of the same ideology. When will we all recognize who and what Obama is and his tactics to drive this nation into total government control, socialism?

The Affordable Care Act (Obamacare) is not affordable. Congress needs to go back and just fix the things that really needed to be fixed like insurance companies dropping people when the get sick, tort reform, Cheaper insurance when you are terminated, shopping for insurance across state lines for example. Not government takeover.

The fun is just starting! Once the government is in charge of healthcare there will be new laws implemented to control our life styles. This is because the government has a financial interest in our conduct. "They” pay for our healthcare. They already tell us how much water we can use to flush our toilets, what type of light bulb to use and our cars continue to get smaller because we have to reach a government mandated MPG figure. All of this from a constitutionally mandated "small Federal Government" with limited powers. Your wages are not yours. They belong to the elite class who will decide how much you get to keep. Is the TEA Party really that radical?

As we say here in Texas, you are all hat & no cattle. It's one thing to say Blahous is erroneous & quite another to prove it with actual facts & figures. Seems you've taken the Polesi approach. Just say it loud enough & that will make it true. Weak try pal.

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